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01 Dec 1111 Vanuatu insurer not liable to Australian tax - Crown

The AAT has held that Crown Insurance Services Limited (Crown), a company incorporated in Vanuatu, was not a resident of Australia in each of the 2004, 2005, 2006 and 2007 income tax years, and was not in receipt of income having an Australian source.

Crown was an insurer which, from 2002, entered into contracts with Australian companies which provided funeral benefits on the death of Australian residents who were members of various funds operated by the Australian companies.

After reviewing the evidence, the AAT said, at para 74:

"I am satisfied that Crown did not have its central management and control in Australia during the years in question. Were it necessary to reach a conclusion on where central management and control was, I would have no hesitation in concluding that its operations were controlled and directed in Vanuatu. It was incorporated in that country, it held its directors’ meetings in that country, its accounts were prepared, kept and audited in that country, its employees or agents resided in that country, the insurance contracts that were the basis of its business were made in that country and decisions or claims under those policies were made in that country. But it is sufficient to say that none of those activities are undertaken in Australia."

In relation to the source of Crown's income, the Commissioner focussed upon the original source of Crown’s income, premium amounts received directly or indirectly by the Australia companies, from fund members solely in Australia, after management fees and other expenses have been deducted by the Australian companies.

In rejecting the Commissioner's submissions, the AAT said, at para 85:

"The source of Crown’s income was the insurance contracts with the various member companies. I am satisfied that the contracts were made in Vanuatu. And I have already concluded that those contracts were performed in Vanuatu, not Australia. I am then satisfied that Crown’s income in the years in issue was not derived from sources in Australia."

The matter was remitted to the Commissioner with a direction that Crown’s objection decision be allowed in full: Crown Insurance Services Limited and FCT [2011] AATA 847 (AAT, Hack SC DP, 30 November 2011).


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